Most Trusts allow Trustees to pay themselves “reasonable” fees for the work they do, but what is reasonable? That depends on the type of Trustee you have. In this video, Keith Davidson discusses some of the issues relating to reasonable Trustee fees that can be charged by your Trustee.
If you have an undue influence claim, here are the top five things you must consider in bringing your claim in court:
- 1. It’s a Two-Headed Monster
Starting January 1, 2014, the definition of undue influence was unified under Welfare and Institutions Code Section 15610.70. That means the same facts and circumstances that you use to directly prove undue influence to overturn Trusts and Wills are also used (or usable) to bring a financial elder abuse claim based on undue influence. So every Trust and Will contest becomes a potential financial elder abuse case too. And elder abuse claims are given jury trials, allow for punitive damages, and recovery of attorney’s fees—all things you CANNOT get in a Trust or Will contest lawsuit.
- 2. Equity Isn’t Enough
An unfair result, by itself, is not enough to prove undue influence. Unfortunately, a parent can treat a child unfairly if he or she chooses to do so. Undue influence is essentially the replacing of the decedent’s intent with that of a wrongdoer. So if the parent chose to act unfairly, so be it, the law has no problem with that. If a wrongdoer coerced the parent into acting unfairly, then you may have undue influence.
- 3. Shifting the Burden of Proof
Undue influence is one of the few claims where you can shift the burden of proof onto the wrongdoer to prove that they did NOT engage in undue influence. But to do so, you first need to prove that (1) the wrongdoer was in a confidential relationship with the decedent, (2) the wrongdoer actively participated in procuring the Trust or Will, and (3) the wrongdoer unduly benefitted from the new document.
- 4. You Still Need a Weak Mental State
The first element for undue influence is that the decedent was susceptible to being unduly influenced. They do not need to be incapacitated, per se, just susceptible to influence. The other elements focus on the actions of the wrongdoer, but you still need a medical expert to testify to whether the decedent was susceptible to undue influence.
- 5. Undue Influence Requires a Good Back-Story
Anytime you are asking the court to overturn a Trust or Will, you need a compelling reason to do so. California Trust and Will contests are decided by judges (called a bench trial) and judges are people too. Most judges have seen it all, so while your case may seem outrageous to you, it is just another case to the judge. And most judges want to reach the “right” result, which means your case needs to compel the judge to make things “right” by overturning the Trust or Will. Judges are not compelled to do that just because you ask them to do so. But they are inclined to act when presented with a back-story that shows that someone took an unfair advantage of a decedent. Therefore, a good back-story of events that occurred leading up to the Trust or Will creation is vital to winning your undue influence case in court.
In California, as in every other state, you can create a joint tenancy account with anyone you like, including a friend, caretake, or child. And most people know that a joint account automatically transfers to the surviving joint account holder at death. What you may not know, is who really is viewed as owning the account monies during your lifetime. In this video, Keith Davidson describes who owns your California joint tenancy bank account.
Make no mistake, litigation is a fight. If you are going to try to set aside a Trust or Will document, you have a fight coming your way. And in most cases, it can be a long, tough, expensive fight. Unfortunately, there is no other way to stand up for your rights but to go to court and fight for what is right. And once you step into the boxing ring, you have to expect to get hit (and sometimes hit hard).
That does not mean that you fold your tent and go home. Boxing is a game of endurance and perseverance as much as it is a show of strength. The longer you hold in there, the better chance you have at achieving a fair and just result. Sometimes that result comes in the form of a favorable settlement, sometimes it take a full-blown trial, and sometimes even just causes lose. But if you give up without a fight, then you are guaranteed to lose. That means the only way to win a just and fair result is to take your chances in the boxing ring.
Better yet, if you want to increase your changes of winning, then put in the effort and work it takes to provide the best effort possible when in court. Of course, that comes down to the right preparation for your case. And preparation takes time (and time is money). But without preparation, you have no idea if you can go the distance in your fight.
So the next time you step in the boxing ring, prepare for a tough fit, but hand in for the distance. Most people give in far before the case is over, so the long you can go, the better your chances for a just result.
You are on a plane and hit a good bit of turbulence, or the plane drops in altitude suddenly, and you think to yourself that you never did prepare your Will, so you send a quick text to a family member or friend setting out your desires should you not make it. Of course, most of the time you worried for nothing, but what if the worst happens, would your text be considered a valid Will?
It all comes down to one archaic little concept: formalities. Will formalities go back centuries to a time when last wills and testaments were originally taken by a priest on the person’s deathbed. Over time, the law created formalistic “safeguards” to ensure that the Will reflected the true intent of the decedent. And those formalities still exist today.
There are two ways to create a Will in California: (1) a handwritten Will where the entire document (or a substantial portion) is in your handwriting and then signed by you; or (2) a printed document that is signed by you and then signed by two witnesses. Neither one of these options is particularly high tech, in fact the handwritten will is about as far from a text as you can get (other than maybe writing on stone).
But things are changing. Just six years ago, California added Probate Code section 6110(c)(2) that allowed the admission of Wills that do not meet all of the formalistic requirements, provided there is clear and convincing evidence that the document was meant to be a Will. Even so, it would be nearly impossible to validate a Will that has no handwritten signature.
Text messages are not in your handwriting, they are not signed with an actual signature, and they are not witnessed by anyone, so a text does not meet any of the traditional definitions for a valid Will. This prompts the question of what is a writing? In many ways a text is the modern equivalent of a hand written note. It is typed by the person creating it and it is often “signed” with a digital signature or at least a typed out name. Shouldn’t that qualify for a handwritten Will?
That remains an open question in California. There has been case law in other states that holds that a typed Will could be enforceable provided you are able to prove that no other person had access to the decedent’s electronic account. In other words, we allow handwritten Wills because we know for certain that only the decedent wrote it. If you can prove the same concept for a text or email or whatever (tweet, Facebook post, Snapchat?) then you could establish an electronic message as a “handwritten” Will.
Unfortunately, there is no California case law on point yet. Isn’t that ironic considering we are home to Silicon Valley? As of this writing, you can text your Will all you want, but it probably won’t be valid as a Will. And yet, if you grab a napkin and write out a Will with a pen, then that is undoubtedly a Will. So before you leave home, do a proper Will, or at least jot something down on a notepad and then sign it. When it comes to your Will, low tech wins the day.
Under California law, no-cotest clauses in California Trust and Wills have been substantially limited in their applicability. In most cases they simply will not apply. But even when a no-contest clause does apply, it may still be possible to escape its affects. In this video, Stewart Albertson discusses when you can escape the harsh affects of a no-contest clause.
If you are a California Trustee, here are eight must know facts for your to properly administer your Trust and keep yourself safe from any personal liability:
1. Know Your Duties
Being a Trustee is a thankless job. You owe many duties and obligations to the beneficiaries, but they owe you no duties at all. That means, if you are going to succeed as a Trustee, you have to know what your duties are in the first place.
2. Know the Uniform Prudent Investor Act
If you do not follow any other duty as Trustee, at least know and follow the Uniform Prudent Investor Act. When the Trust creator was alive, he or she was able to invest however they pleased. Not so with you. As a successor Trustee you have a duty to invest prudently. That means you have to follow the investment rules. And you really should have an investor’s policy statement (or IPS). An IPS is an investment plan that your financial professional creates for you. You can then invest according to that plan and check in with the financial professional once per quarter to be sure the investments are performing as expected. The law does not mandate an IPS, but when we attack Trustee’s is looks very bad in court to invest without one. And for good reason, how do you know your are investing prudently if you have no written plan?
3. Know Your beneficiaries
As a Trustee, you have a duty to know your beneficiaries, especially if the Trust gives you the power to make distributions based on a standard, such as health, education, maintenance and support (the standard “ascertainable standard”). When you have that power, it is up to you (the Trustee) to determine what the beneficiaries needs are and whether a distribution must be made to meet those needs. You are not allowed to ignore the beneficiary or even force them to ask for a distribution. Rather, the Trustee must be proactive and inquire as to the beneficiaries needs.
4. Know your assets
Trustees must take control of Trust assets (referred to as “marshaling” assets). But you cannot take control of assets you don’t know about, so your first job is to get to know the Trust assets. How are they held, how are they invested, and what is the future plan for each asset? If an asset is in danger of losing value, then the Trustee must take action to protect the assets and prevent a loss, if possible.
5. Keep all receipts and statements so you can account
Every Trustee must account for their actions (read more about Trust accountings here). That means you have to demonstrate what assets you started with, what you received in income, what you spent on expenses, the distributions you made to beneficiaries, and what is left at the end of the accounting period. And each of these categories must be supported by detailed schedules showing each transactions by date, description and amount. The only way to report that level of detail is to keep all receipts, account statements, and similar financial documents so a thorough accounting can be prepared.
6. Understand Trust accounting
Trust accounts are VERY DIFFERENT from corporate or business accountings. If you ask your CPA for a Trust accounting, and they give you a balance sheet and profit and loss statement as you would have for a business accounting, run to another CPA immediately. Trust accounts do not have balance sheets and profit and loss statements. In fact, Probate Code section 1061 lists exactly what a Trust accounting mut have, which is a list of charges and credits. The charges must begin with the assets on hand at the start of the accounting period, the income received and any gain on sale (in other words, every asset coming into the “charge” of the Trustee). The credits represent the cost side of things, such as the expenses paid, the distributions to beneficiaries, any losses on sale, and ends with the assets on hand at the end of the accounting period. The charges must equal the credits for the accounting to balance. And each category must have a supporting schedule showing all the details (for example, all the detail for every expense paid).
7. Know the Statute of Limitations
How long does a beneficiary have to file a lawsuit against you as Trustee? It depends. If you serve Trustee’s notice under Probate Code section 16061.7, then the beneficiary has 120 days in which to file to contest the Trust terms. As for your actions as Trustee, that statute remains open indefinitely unless you provide an accounting to the beneficiaries. Once an accounting is provided (assuming is fully discloses all actions you took as Trustee), then the beneficiary has three years to sue the Trustee. If you file your accounting in court and see court approval, then the beneficiary must either object prior to court approval or be forever barred from suing you as trustee for everything reported in the accounting.
8. Communication/Information is Key
Being a Trustee is a thankless job, especially if you are dealing with difficult or demanding beneficiaries. But you have too many duties to ignore beneficiaries. The key is to communicate as often as possible with beneficiaries. Send out copies of bank statements, send letters updating beneficiaries on the Trust administration if you have to, whatever it takes. The more you communicate, the better.
Do you have the evidence required to prove your case in Court? Why not make the other side prove it instead? Under California law, there are time when you can shift the burden of proof onto your opponent. In this video, Stewart Albertson describes the burden shift under California law.
Getting the cold shoulder from your Trustee? While every Trustee has a duty to communicate with the beneficiaries and provide required information, it does not always happen that way. Maybe the Trustee does not know their fiduciary duties, maybe they don’t know the answer to the questions your asking, or worse yet, maybe they don’t want you to know what they are up to.
When a Trustee fails to communicate, beneficiaries usually assume the worst. And, for good reason: a lack of communication is usually the result of people doing things they should not do.
But as a beneficiary you are entitled to communication from your Trustee. How do you enforce that? You file a petition in court and demand to receive the information that you requested. Once the petition is filed, not only can you get the information by way or a court order, but you also have subpoena power. Said power allows you to subpoena the documents you are after.
While you should never get the cold shoulder from your Trustee, you can take action to stop that. It’s up to you to act to protect your rights.
Ever have someone make you a promise? How about a promise to leave you property after they die if only you take care of them while they are alive? That can be a good deal or a terrible deal when the person making the promise fails to ever create a Will naming you as a beneficiary. In this video, Stewart Albertson discusses whether or not you can enforce a promise to leave you property in a California Will.